Construction contracts often include a liquidated damages (“LD”) clause in which the parties agree the financial consequences of the contractor’s delay. Typically, those clauses require the contractor to pay a pre-determined amount (often calculated on a daily or weekly basis) to the employer in the event the contractor fails to achieve completion as required by the contract by the contractual completion date. In doing so, the employer does not have to demonstrate its actual loss (or indeed any loss) resulting from the delay and, instead, deducts LD calculated at the pre-determined rate. The benefit to the contractor of an LD provision is that he is able to quantify his liability in the event of delay.

We previously considered the Court of Appeal’s decision in Grove Developments v S&T (our article “Grab the cash, adjudicate later”), in particular whether Sir Rupert Jackson’s obiter comments (as to the timing of an employer’s right to have the true valuation of an interim application for payment determined in an adjudication where it has failed to issue a valid payment and/or pay less notice) raised further questions; did the contractor have a jurisdictional challenge if the employer started an adjudication before paying the ‘notified sum’?

In February 2019, we wrote an article headed “Approbation and Reprobation in Adjudication - Another Jurisdictional Challenge Fails” in which we made the point that parties regularly challenge an adjudicator’s jurisdiction. Hitachi was no different in the case of Hitachi Zosen Inova AG v John Sisk & Son Limited

As a means to resist enforcement of an adjudicator’s decision, or otherwise frustrate the adjudication process, parties regularly challenge an adjudicator’s jurisdiction. The first challenge is often that the referring party has not followed the correct procedure in appointing the adjudicator. However, a party cannot “blow hot and cold” in asserting an adjudicator’s decision is valid for one purpose while also challenging its validity for another; a principle known as approbation and reprobation (“A/R”).

It is not uncommon for contractors to start work on the basis of a letter of intent and to postpone the agreement of contract terms to a later date. In some cases, despite terms going back-and-forth between the parties, a formal contract never materialises but the work continues nonetheless. This can prove to be a risky approach, as to which Arcadis v AMEC serves as a cautionary tale.